On Friday, Luye Pharma Group Ltd. (2186:HK) (OTC: LYPHF) saw its stock rating upgraded from Sell to Buy by a Citi analyst, accompanied by an increase in the price target to HK$4.00 from the previous HK$2.40. The adjustment comes as the company's management has provided a positive revenue outlook, forecasting over Rmb7 billion by 2025 and surpassing Rmb10 billion by 2027.
This growth is expected to be fueled by a combination of the introduction of new products and consistent sales from four established products: Lipusu, Seroquel, Xuezhikang, and Oukai.
The analyst highlighted management's commitment to improving the net profit margin (NPM) to 20% by the fiscal year 2027, up from 14.3% in the first half of 2024. This improvement is anticipated to stem from two key strategies: increasing the gross profit margin (GPM) on products to 70% from 64% and reducing the administration and financial expense ratio to 5% and 4% respectively, down from 9% each in the first half of 2024.
Luye Pharma also aims to decrease its debt by Rmb1.5 billion and save Rmb100 million in financial expenses in the fiscal year 2024. The company's performance in the first half of 2024 indicates that it is on a successful path to enhance profitability.
The analyst's decision to upgrade the stock and raise the price target reflects confidence in Luye Pharma's financial strategies and the expected revenue boost from the licensing out of Paliperidone palmitate.
The revised price target of HK$4.00 represents a significant increase and underscores the analyst's positive outlook on the pharmaceutical company's future performance. The upgrade to a Buy rating suggests that the analyst sees a favorable investment opportunity in Luye Pharma's shares, based on the company's strategic initiatives and growth prospects.
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